ARPA at Work: Creating a Pathway to Business Ownership in Main South
It has been more than three years since the City of Worcester was awarded approximately $146.6 million in American Rescue Plan Act (ARPA) funds from the US Department of Treasury and the Commonwealth of Massachusetts. The federal and state government distributed the funds to help municipalities respond to the public health emergency, COVID-19, and the resulting negative economic impacts.
I would like to give the community a closer look at some of the ARPA investments the municipality has made and highlight the good work accomplished to date, so with this Substack and an episode of The Buzz, my administration is launching an ARPA at Work series. The campaign will feature specific projects in the city that have received ARPA funding on the municipality’s social media accounts and here on the Substack.
Eligible uses for ARPA funding are to support public health expenditures, address negative economic impacts caused by the public health emergency, replace lost public sector revenue, provide premium pay for essential workers, and invest in water, sewer, and broadband infrastructure.
The municipality has used these funds to help the community bounce back from the pandemic, distributing them to housing programs, community-based initiatives, small businesses, cultural organizations, mental health support programs, and public assets and infrastructure.
To inform these investments, the municipality held five community input meetings and launched an online survey to get community feedback about how they wanted ARPA money to be spent. Following that process, the municipality established ad-hoc committees made up of residents to help develop and evaluate certain grant applications. The committees include the Affordable Housing Trust Fund, Business Assistance, Community Programs, Creative Economy, and Mental Health. Based on the community engagement and federal guidelines, the municipality prioritized investments to benefit disproportionately impacted populations,
Over $59.5 million of the $146.6 million in ARPA funds has already been spent on carefully selected programs and initiatives, nearly $42.8 million of it has been contracted, and the remaining $44.3 million has been earmarked for specific uses, but still needs to be contracted. The municipality has until the end of 2024 to contract the remainder of the funds and until the end of 2026 to expend them.
The first project I’d like to highlight in the ARPA at Work series is the development of six affordable commercial condominiums at 807 Main Street.
Main South Community Development Corporation (Main South CDC) is developing the project with the goal of addressing small business displacement and providing opportunities for generational wealth creation.
The approximately $4 million project received $995,000 in ARPA funds as part of the Community Projects & Programs initiative, which was designed to assist nonprofit organizations with grant funding to support projects and programs that respond to the negative effects of the pandemic.
Other funding sources for the project include Mass Development, State ARPA dollars, and the Environmental Protection Agency (EPA) Brownfields grant administered by the municipality.
“The ARPA funding was critical to this project, it came at a time when construction costs have gone through the roof,” said Main South CDC Executive Director Stephen Teasdale. “Post-COVID, trying to maintain any affordability was impossible unless there was some subsidy to [drive] down the development costs. The ARPA funds allowed the project to go forward...allowed us to obtain our objective of making sure [the condominiums] were affordable to local businesses.”
The condominiums were marketed to the local, predominantly BIPOC small business community in Main South who were disproportionately impacted by the pandemic. Through an application process that was designed to give local businesses that had been operating in Main South for some time a priority, Main South CDC has selected seven potential tenants/buyers.
The CDC is helping those businesses with the banking process and will ultimately decide the final tenants/buyers in the coming months.
The majority of the potential candidates are BIPOC small business owners who are existing members of the Main South Business Association.
“The diversity of the owners represents the diversity of the neighborhood pretty well,” said Teasdale.
MassDevelopment designated a portion of Main South’s commercial corridor as a Transformative Development Initiative District, opening it up to technical assistance and state funding support. Community engagement through the TDI initiative found that small business owners in the district are vulnerable to rent increases from their landlords in their current spaces, and some of the businesses have never had a written lease agreement.
These conditions create instability and inequity for these business owners who have invested their heart, soul, and personal savings into starting and growing their businesses.
This project will take a vacant, blighted lot with elevated levels of arsenic and petroleum in the soil, clean it up using funds from the EPA Brownfields Cleanup Revolving Loan program, and construct a 7,600+ square foot commercial structure in its place.
The six condominium units will be between1,150 and 1,720 square feet and include on-site parking.
Cleanup of the site began in April 2024, allowing construction to start and a foundation to be laid. The target date for construction completion is March 2025.
Since the chosen owners may need time to establish a credit score that would enable them to successfully secure mortgage financing, Main South CDC is prepared to own each individual condo for up to five years. Those owners will enter into a “Lease to Own” model in which Main South CDC will help them take the necessary steps to establish a credit history and to ensure they can satisfy the lending underwriting requirements before the end of the five-year term. The five-year lease period will also give business owners time to save the 15% down payment for their mortgage financing.
The initial rents for the units will be equivalent to or less than other commercial rents in the area, and the proposed sales prices will be fixed at the signing of the “Lease to Own” agreement. Once the businesses purchase the condominiums, their monthly payment would be equal to or less than what they were paying in rent. At that time the Main South CDC would no longer have an ownership interest in the project but would stay on as the Management Agent.
The potential condo owners are very excited about the project, according to Teasdale.
“They recognize this as a way to stabilize their businesses, to become economic stakeholders in the neighborhood, and continue ongoing revitalization efforts [in Main South],” said Teasdale.
During the pandemic we saw several small businesses shutter, and projects like this one will work to bring back the opportunities to create equity and wealth that were lost during that time.
Next month, I will discuss $1.5 million in funding that the municipality allocated to fund youth employment to prevent unexpected cuts to the state-funded summer youth employment program, YouthWorks, from taking away important summer job opportunities from Worcester youth.